The Rogue Court That Made Patents So Destructive

from the cafc-cafc-cafc dept

We've written many, many times about the problems created by the Court of Appeals for the Federal Circuit, CAFC, who (among other things) is the appeals court that has jurisdiction over all patent appeals. It's a court that has been around for 30 years as of this week, and in the opinion of many, has been an unmitigated disaster. Of course, if you're a patent lawyer or a patent troll, you might think the opposite. As we've discussed in the past, CAFC has spent the last 30 years massively helping patent holders by expanding the definitions of what was patentable, and generally being much, much, much more favorable to patent holders than appeals courts had been back when jurisdiction was split among the 12 difference circuit appeals courts. With its 30th anniversary this week, Tim Lee has written a post detailing how it "wrecked the patent system." It's a great read, covering a number of key points.

Lee kicks it off by pointing to Adam Jaffe and Josh Lerner's seminal book, Innovation and Its Discontents, published in 2004. If you want to see a patent system defender turn bright red, just bring up this book. They go absolutely ballistic about it, insisting that it's all myths and lies made up by critics who don't understand the patent system. You see, in the world of patent lovers, the only people who are allowed to criticize the patent system, are those who are patent lawyers. Everyone else, in their book, simply doesn't understand the facts. Of course, when you suggest that perhaps it does make sense that economists might be able to highlight how bad patents harm the economy, they have no reasonable answer. Either way, you can't get past facts, and Jaffe and Lerner's facts clearly show a massive shift in favor of patents due to CAFC. From their book, here is the rate in which patents were found valid and infringed upon appeal from 1925 up through 2000.

Whether or not you agree with Jaffe and Lerner, there is no denying that there's a pretty massive shift at the moment CAFC is created. Lerner and Jaffe focus their reasons why on "judicial capture," specifically fingering Judge Giles Rich, an unabashed patent system supporter and a former patent lawyer who basically wrote the 1956 Patent Act, and then got to "interpret" his own work as a CAFC judge. Of course, patent system supporters argue that Judge Rich was just one judge, and even while there were some former patent attorneys on the CAFC bench, it was never the majority of CAFC judges. Lee's piece does a really good job explaining how a variety of issues have made it such that CAFC judges almost always favor expanded patent powers:

...the heavy load of patent cases on the court's docket means that the judges of the Federal Circuit are constantly interacting with patent lawyers. In addition to hearing their arguments in the courtroom, they read the same patent law publications as the lawyers, hire young patent lawyers to clerk for them, and are invited to speak at events organized by the patent bar.

Moreover, the prestige of the Federal Circuit itself is directly tied to the prominence of patent law in the American legal system. If the Federal Circuit had followed the stricter rules in place before the court was created, patent law might have remained a legal backwater, receiving little attention from either the legal profession or the general public. That, of course, would have made the Federal Circuit a less prestigious place to work.

[....] patent appeals are exclusively heard in DC by judges who live and breathe patent law. Unsurprisingly, this leads to insular thinking. For example, when we interviewed Paul Michel, who served as the Federal Circuit's chief judge from 2004 to 2010, he didn't seem to understand the problems facing small software companies. "If software is less dependent on patents, fine then. Let software use patents less as they choose," he said, seemingly oblivious to the fact that software companies don't have the option to opt out of patent troll lawsuits.

Lee also goes into detail on how CAFC effectively "overruled" the Supreme Court on various issues related to patents, in part because, historically, the Supreme Court ignored patent issues as being petty, "commercial" disputes, unrelated the the weighty constitutional issues that it was focused on. Thankfully, over the past seven or eight years, the Supreme Court has become a lot more interested in patent issues, almost always slapping down CAFC. Even so, as Lee notes, patent lawyers know that CAFC often seems to hold itself to a different standard:

This dismissive attitude toward Supreme Court precedents apparently survives to this day among patent lawyers. In the wake of this year's decision limiting patents on the practice of medicine, patent attorney Gene Quinn wondered, "How long will it take the Federal Circuit to overrule this inexplicable nonsense?" Obviously, the Federal Circuit can't "overrule" a Supreme Court decision. But with enough persistence, it can, and often does, subvert the principles enunciated by the nation's highest court. And when it does so, it almost always works in the direction of making patents easier to obtain and enforce.

These all represent real problems and the really bizarre thing is that it makes absolutely no sense for this single court to exist. Part of the reason that we have all of the different circuits is to create differing viewpoints from different courts, which then allow the Supreme Court to consider the different opinions and to point out which is proper. But without any circuit split issues to deal with, and with that form of "judicial capture" going on in CAFC, the results are a one-way ratchet, except in the few cases where the Supreme Court decides to step in, despite a lack of circuit split. Lee points out that we could see a lot more interesting rulings if we just treated patent cases (as we used to) like most other cases, and let each circuit decide the appeals separately:

The consolidation of the patent jurisdiction in a single appeals court has also deprived the judicial system of valuable viewpoint diversity. Consider Judge Richard Posner of the Seventh Circuit Court of Appeals. This summer, he threw out the entire patent lawsuit between Apple and Motorola, arguing that the patent system had descended into "chaos." Posner was able to hear the case because he was temporarily filling in as a trial court judge, but the Federal Circuit—not his own Seventh Circuit—will hear appeals in the case.

Under the pre-1982 judicial structure, Posner and his colleagues on the Seventh Circuit Court of Appeals would have heard appeals in some of the nation's patent lawsuits. If his comments in the Apple/Motorola case are any indication, Posner would sharply disagree with some of the Federal Circuit's precedents. This kind of disagreement among appeals courts, known in legal jargon as a "circuit split," would signal the Supreme Court that it needed to step in and resolve the dispute.

Posner's skeptical view of the patent system may be explained by the fact that he's an academic as well as a judge. This background may have exposed him to academic criticisms of current patent jurisprudence that aren't as well known to other judges. Similarly, if the Ninth Circuit Court of Appeals (based in San Francisco) were allowed to hear patent appeals, some of its judges might share Silicon Valley's skeptical attitude toward software patents. Such dissenting views would provide balance to the Federal Circuit's pro-patent rulings and give the Supreme Court the raw material it needs to fashion a sensible body of patent law.

This is a pretty big problem -- and one that is much more significant and troubling that the "problem" that the government was trying to "solve" with the establishment of CAFC. The issue then was that people would "rush" to different courts to file their patent lawsuits, trying to use jurisdiction shopping to find a favorable court. Of course, switching to a single federal appeals court didn't even do anything to fix that problem. Just ask patent trolls their opinion on East Texas to see why.

All of this matters quite a lot. Beyond just the fact that CAFC's various rulings have massively expanded patent law (such as by recognizing that software and business methods could be patentable, despite most people believing neither were prior to CAFC's rulings, or by establishing much more restrictive rules on when a patent could be invalidated), it's become unfortunately common for some (including people we otherwise agree with) to think that the solution to the problems with today's patents is because judges aren't that familiar with patents, and thus it would be best to set up specialized courts or even specialized judges, who focus mainly on patent issues. But, of course, that seems to be making the exact same mistake all over again. Such courts or judges become victim to the same pressures as CAFC has, creating the same broken incentive structure that has resulted in such problems in the first place.

On this 30th anniversary of CAFC, it seems only reasonable that one step towards fixing the broken patent system is a simple one: end having all patent cases the jurisdiction of CAFC and send those cases back to the individual circuit appeals courts.

CAFC-aesque, indeed

Considering that people get shaken down for licensing fees (or be-FUD-ed) for patents which aren't even specified (e.g., Microsoft w.r.t. Linux/Android), I dare say that CAFC-a himself would be proud of the job this court is doing!

The curve on the graph seems rather suspect. I have seen such holes followed by abrupt changes in numbers before, but in those situations it has been because the methodology has changed.
Are you sure it is legit?

I have not read the book, so I cannot comment on the rest. The purely legal problem is way out of my league.

For those who seem inclined to was poetic about all the "terribles" associated with the Court of Appeals for the Federal Circuit (CAFC), perhaps they should first take the time to learn something about the history of the court and its appellate jurisdiction. Its history is straightforward. In 1982 the CAFC was formed by the merger into a single appellate body of the Court of Customs and Patent Appeals and the appellate division of the US Court of Claims, each of which had previously been declared to be Article III courts, just like all other US District Courts and US Circuit Courts of Appeal. Each of these court had exclusive jurisdiction over various types of appeals, and over the years had developed an extensive body of law that served as precedents for their areas of exclusivity. With the formation in 1982 of the CAFC, the first act of the new court was to declare that all prior precedents were carried forward to the new court and would govern its subsequent deliberations and opinions. In other words, there was far more to the formation of the CAFC than simply vesting appeals concerning patent law in a single appellate body.

It would also be useful to take the time to learn precisely what the jurisdiction of the CAFC entails. A helpful summary of its jurisdiction can be found at http://www.cafc.uscourts.gov/the-court/court-jurisdiction.html. Even a casual perusal of the foregoing site will quickly demonstrate that appeals in cases involving "substantial question of patent law" form only about 30% or so of the court's docket. Cases arising under Title 35 are obviously those most closely associated with the CAFC, but it is useful to note that not everything associated with patents falls under the exclusive jurisdiction of the CAFC. The exploitation of patents in such a manner that anti-trust law is implicated? Not on the CAFC's plate. Who actually "owns" a patent? Typically a matter decided by state law, and not federal law, but on rare occasions cases like Roche v. Stanford find their way before the CAFC (which case, by the way, was later heard by the Supreme Court and it, shockingly if court critics are to be believed, was upheld in a 7-2 decision).

As for the constant criticism that the court is "pro-patent" and should be disbanded in favor or returning appellate jurisdiction to the 13 Circuit Courts of Appeal (the 13th being that of the DC Crcuit), it would be helpful if critics would actually take the time to read its opinions, and especially those rare opinions causing persons to raise a hue and cry about its exclusive appellate jurisdiction in most patent matters. The court does not operate in a vacuum. For example, in its recent "Myriad" decision, the court relied not only on the briefs presented by the parties-in-interest, but also upon amicus briefs filed by 23 organizations and individuals exploring all facets of the issues before the court.

While there are many other proclamations in the article above that deserve being discussed, such as the CAFA expanding subject matter eligibility under Section 101 of the Patent Act, there is one in particular that is so far off the mark as to be ludicrous in the extreme. It is repeatedly, and inaccurately, stated that Judge Rich is the "father" of patent law and incorporated all of his so-called pro-patent bias in the drafting of the Patent Act of 1952. Those who repeat this simply haven't a clue about what the Patent Act of 1952 comprises. Judge Rich, together with Pasquale Federico, are the two individuals most closely associated with preparing an initial draft that reflected solely the codification of prior statutory and federal common law. To the extent any new provisions of law were added to the draft, these were done during consideration of the draft by the cognizant committees of the House and Senate, and not by Judge Rich and Mr. Federico. While they were certainly witnesses, among many, who appeared before the committees, they were not the ones who crafted the final legislation that ultimately was enacted as the Patent Act of 1952. Of course, to understand this would require one to actually review the legislative history associated with the Act. I do have to wonder, based upon the many clearly erroneous comments I have read over the years, I any of the critics have even seen the legislative history, much less read it for comprehension.

If one is inclined to criticize the CAFC, a bit of background investigation is a worthwhile endeavor before authoring revisionist history articles.

Re:

In typical civics courses what you say about what courts do is what the lesson plans teach. In reality, however, courts do make law, not only by interpreting existing statutes, but also by the assembly of existing legal doctrines into what is know as "common law, sometimes also referred to as "judge-made" law.

I think that CAFC isn't pro-patent, as much as they have an understanding of the law from both sides, and are more likely to come down on the side of the law, rather than some emotional "they are blocking my business" attacks on patents.

It seems just much more of a case of getting people who understand actually ruling, rather than random 80 year old judges who don't understand these things.

more dissembling by Masnick

The word on the street is that Lee, Jaffe, Lerner and you are all funded by the world's largest invention thieves who for years have been trying bribe Congress into passing changes in the patent laws to enable the big thieves to steal their small competitors inventions and drive them out of business.

“Patent troll”

Call it what you will...patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: “we’re using your invention and we’re not going to pay or stop”. This is just dissembling by large invention thieves and their paid puppets to kill any inventor support system. It is purely about legalizing theft. The fact is, many of the large multinationals and their puppets who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so.

It’s about property rights. They should not only be for the rich and powerful. Show me a country with weak or ineffective property rights and I’ll show you a weak economy with high unemployment. Does that remind you of any present day country?

Prior to eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now some of those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back in the patent system with injunctions fully enforceable on all infringers by all inventors, large and small.

Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.